Samsung Electronics (KS:005930) Co. Ltd. (OTC:SSNLF) has announced that shipments of its recently released phablet, the Galaxy Note 7, are being halted so that the company can conduct additional quality tests for their product. The company has not directly explained why they are doing additional product testing, but there is a strong chance that this action is linked to recent user claims about the Note 7 exploding while charging.
If there do turn out to be quality problems for the device, it could deal a major blow to Samsung stock. The company’s latest phone was made with the hopes that it could steer smartphone buyers away from the iPhone 7 before it gets released. Apple (NASDAQ:AAPL) is the well-established king of the smartphone market, and the timing of this news couldn’t be any worse for Samsung because the iPhone 7 is set to be unveiled next week.
The shipment halt exacerbates problems for Samsung because it is already behind on delivering phones to customers. The corporation cited issues in the supply chain as the reason for why it is struggling to keep up with the demand for its latest device. While too much demand is a good problem to have, delays could ultimately contribute towards generating fewer sales than expected. In fact, delays were the main reason for why Samsung’s Galaxy S6 Edge phone had poor sales last year.
At best, this halt will result in a longer delay for people waiting for their phones to come in. The worst case scenario is much grimmer though, since a widespread problem with the device could lead to a recall. The phone has not even been out for a month yet, so there is a chance that the Note 7 shipments are being halted because of other quality issues which Samsung needs to work out. However, given the recent reports of multiple phones exploding, this is somewhat doubtful.
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